Tuesday, February 14, 2006

SEPA Incentives.... or quite the opposite?

Yesterday, the Commission released a new version of the so-called Incentives Paper. The industry now have 5 weeks to respond to 72 questions on issues such as: SEPA-governance, SEPA=products, adoption, standards, competition, migration cost, repositioning of cash/cheques, customer choice and mobility and e-invoicing.

The timing is impeccable, as the industry is already contemplating:- the content of EPC-rulebooks, card-framework and settlement mechanisms,- the new legal framework for payments in the internal market- the revision of the e-money directive,- the evaluation of regulation 2560,- the delay and renewed planning for Target2,- the implementation of an upcoming regulation to implement FATF-recommendation 7.

Needless to state that given the above agenda, it is rather naive to expect the industry to be able to react properly to this document. And interestingly: while the Commission stresses in its White Paper on Financial Services the principles of better regulation, it ignores the standard 8 weeks response time, suggested by those same principles.

So what does the document do? It describes the Commissions preference for self-regulation and at the same time lists a huge number of concerns that the Commission has with respect to the SEPA-project of the European Payment Council. It also describes the vision of the Commission: As the main goal of SEPA is economic, its overall success will be judged by theeconomies it delivers. It will be deemed a success when the full potential of economies of scale and scope and competition are realized with the euro-zone. This means savings for users and lower costs for providers. This vision does not allow for developments that will only take us half the way. A mini-SEPA that only delivers solutions for cross-border payments in Europe is not acceptable. This will only add an extra payment system on top of the 25 national systems that we already have and thus increase cost and not create great benefits, or realize economies of scale and scope. Competition on the European level will not be possible as all payment systems remain nationally fragmented. It will result in a situation where there are new SEPA products on offer, but very few users will adopt them for domestic transactions. A real SEPA will change substantially current domestic payment markets to the benefit of both users and providers.

So what happens here is that, even before the Commission has grasped or awaited the effects of all pending projects and regulation, it already outlines its concerns as to the outcome of those developments and the future competition in the payments market. Anyone who reads this ambiguous document will conclude that the Commission effectively expects nothing to change as a result of the SEPA-efforts and merely is already contemplating ways/angles to hammer in their vision of a perfect payment market by an additional regulation. And all this to ensure that Commissioner McCreevy may add that result to his track-record just before retiring in 2009.

Which leaves us with the question: is this document supposed to be an incentive?